Investment of Insurance Companies And IRDA Regulations MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Investment of Insurance Companies And IRDA Regulations, a fundamental topic in the field of IC 89 Management Accounting. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our Investment of Insurance Companies And IRDA Regulations MCQs are designed to help you grasp the core concepts and excel in solving problems.

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Investment of Insurance Companies And IRDA Regulations MCQs | Page 7 of 16

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Q61.
What responsibility does the Board have regarding investments?

a.

To directly manage all investment functions

b.

To lay down clear norms for investing in 'Other Investments'

c.

To outsource all investment functions to ensure efficiency

d.

To perform internal audits of investment functions

Discuss
Answer: (b).To lay down clear norms for investing in 'Other Investments' Explanation:The Board shall lay down clear norms for investing in 'Other Investments' as specified under sections 27A(2) and 27B(3) of the Insurance Act 1938 by the Investment Committee.
Q62.
What is the requirement mentioned in Regulation 7 (c) of IRDA (Registration of Indian Insurance Companies) Regulations 2000 related to internal control of investment functions?

a.

To outsource all investment functions for efficiency

b.

To segregate functions and operations of Front, Mid, and Back office

c.

To perform internal audits of investment functions

d.

To invest in equity shares and debt instruments

Discuss
Answer: (b).To segregate functions and operations of Front, Mid, and Back office Explanation:Regulation 7 (c) of IRDA (Registration of Indian Insurance Companies) Regulations 2000 requires insurers to ensure proper internal control of investment functions and operations by clearly segregating the functions and operations of Front, Mid, and Back office.
Q63.
What is the significance of the primary data server for investment management?

a.

It should be outsourced to ensure efficiency

b.

It should be located outside the country for security reasons

c.

It should remain within the country for proper internal control

d.

None of the above

Discuss
Answer: (c).It should remain within the country for proper internal control Explanation:The primary data server of the computer application used for investment management shall remain within the country to ensure proper internal control.
Q64.
When is the applicable NAV determined for applications received with local cheques, cash, or demand drafts?

a.

The closing NAV of the same day for applications received before Cut-off Time (3.00pm)

b.

The closing NAV of the next business day for applications received after Cut-off Time (3.00pm)

c.

The closing NAV of the day on which the cheque or demand draft is realized for outstation cheques or demand drafts

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:The applicable NAV for applications received with local cheques, cash, or demand drafts depends on whether they are received before or after Cut-off Time (3.00pm) on a business day. For outstation cheques or demand drafts, the closing NAV of the day on which the cheque or demand draft is realized shall be applied.
Q65.
What is the procedure for determining the applicable NAV for applications received on the last business day of the Financial Year?

a.

All applications received on the last business day up to 3 pm processed with NAV of the last business day

b.

Applications received after 3 pm on the last business day fall into the Next Financial Year with NAV of the immediate next business day applicable

c.

The insurer declares NAV for the last business day of a 'Financial year,' even if it is a non-business day

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:For applications received on the last business day of the Financial Year, those received up to 3 pm shall be processed with the NAV of the last business day. Applications received after 3 pm on the last business day fall into the Next Financial Year, and the NAV of the immediate next business day would be applicable. The insurer is required to declare NAV for the last business day of a 'Financial year,' even if it is a non-business day.
Q66.
What is the responsibility of the internal/concurrent auditor related to the reconciliation of product and fund information?

a.

Monthly reconciliation of premium received with fund values

b.

Reporting on the automated system and process quarterly

c.

Annual reconciliation of premium received with fund values

d.

Reconciliation of premium received with fund values on a daily basis

Discuss
Answer: (b).Reporting on the automated system and process quarterly Explanation:The internal/concurrent auditor shall report on the automated system and process to handle the UIN wise reconciliation and value of policy-wise units held by policyholders and fund-wise NAV on a quarterly basis.
Q67.
According to Regulation 9 vii(a), what percentage of investment in debt instruments should be in sovereign debt for life insurers?

a.

Not less than 65%

b.

Not less than 75%

c.

Not more than 5%

d.

Not more than 8%

Discuss
Answer: (b).Not less than 75% Explanation:Regulation 9 vii(a) specifies that not less than 75% of investment in debt instruments in the case of life insurers should be in sovereign debt, AAA or equivalent rating for long term, and sovereign debt, P1 + or equivalent rating for short-term instruments. This applies to segregated funds level in the case of unit-linked business.
Q68.
According to Regulation 9 vii(b), what is the maximum percentage of investment in debt instruments with a rating of A or below for life insurers?

a.

5%

b.

8%

c.

10%

d.

15%

Discuss
Answer: (a).5% Explanation:Regulation 9 vii(b) specifies that not more than 5% of funds under Regulation 3(a) in debt instruments for life insurers should have a rating of A or below or equivalent rating for long term.
Q69.
What emphasis does Regulation 9 viii place on credit ratings?

a.

Credit ratings replace risk analysis

b.

Credit ratings are not important for investments

c.

Appropriate risk analysis should not be conducted

d.

Credit ratings should not replace appropriate risk analysis and management

Discuss
Answer: (d).Credit ratings should not replace appropriate risk analysis and management Explanation:Regulation 9 viii emphasizes that credit ratings should not replace appropriate risk analysis and management on the part of the insurer. The insurer should conduct risk analysis commensurate with the complexity of the products and materiality of other holdings or could refrain from such investment.
Q70.
What is the purpose of Regulation 9 in the context of exposure and prudential norms?

a.

To define exposure norms for investment assets

b.

To limit investments based on exposure norms

c.

To encourage maximum exposure to investee companies

d.

To provide flexibility in investment choices

Discuss
Answer: (b).To limit investments based on exposure norms Explanation:Regulation 9 is designed to limit insurer investments based on exposure norms. It provides exposure norms for different categories of investment assets and specifies maximum exposure limits for a single investee company.
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